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The Actuary The magazine of the Institute & Faculty of Actuaries

Investors want clearer climate-related disclosures, FRC warns

Companies are falling short of investors’ expectations for clearer disclosures on climate-related risks, the Financial Reporting Council (FRC) warned yesterday.

Companies need to rapidly increase transparency ©iStock

In a new report, the FRC provides guidance on what companies can do to bridge the expectation gap, outlining effective risk management, scenario analysis, and metrics and targets.

It urges firms to use the Task Force on Climate-related Financial Disclosures (TCFD) framework, highlighting how the UK government expects all large asset owners to do so by 2022.

This comes after the FRC – which regulates the actuarial profession – published a statement earlier this year outlining the responsibility of companies to consider their environmental impact.

“Investors are rightly demanding more information and greater transparency from companies on the challenges posed by climate change," FRC CEO, Sir Jon Thompson, said.

“As societal and investor expectations evolve, alongside the regulatory environment, it is clear companies need to rapidly increase their transparency and improve reporting.”

The FRC report came on the same day it was reported that 300 UK MPs now back a campaign calling for fossil fuel divestment from the £700m Parliamentary Pension Fund.

A pledge signed by the politicians warns of fossil fuel assets becoming stranded as the world looks to curtail carbon emissions, and calls for responsible investment.

The Parliamentary Pension Fund’s largest single holding is £11.6m of shares in BP, while it also holds £10.9m in Royal Dutch Shell.

Bank of England governor Mark Carney and the Environmental Audit Committee have both warned that pension savings are at risk because they are exposed to overvalued carbon assets.

“As MPs past and present, and members of the Parliamentary Pension Fund, we call on the trustees to uphold their fiduciary duty and take the financial risks of climate change seriously," the pledge states.

"We ask they quantify, disclose and review the fund’s investments in carbon-intensive industries, engage in a dialogue with fund members and managers on responsible investment, and commit to phasing out fossil fuel investments over an appropriate time-scale.”

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